Has Kino Polska TV Spolka Akcyjna (WSE:KPL) Got What It Takes To Become A Multi-Bagger?

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Kino Polska TV Spolka Akcyjna (WSE:KPL) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Kino Polska TV Spolka Akcyjna is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.16 = zł28m ÷ (zł235m - zł57m) (Based on the trailing twelve months to September 2020).

Thus, Kino Polska TV Spolka Akcyjna has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Media industry average of 14%.

View our latest analysis for Kino Polska TV Spolka Akcyjna

Above you can see how the current ROCE for Kino Polska TV Spolka Akcyjna compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Kino Polska TV Spolka Akcyjna.

What Can We Tell From Kino Polska TV Spolka Akcyjna's ROCE Trend?

On the surface, the trend of ROCE at Kino Polska TV Spolka Akcyjna doesn't inspire confidence. To be more specific, ROCE has fallen from 38% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

Our Take On Kino Polska TV Spolka Akcyjna's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Kino Polska TV Spolka Akcyjna is reinvesting for growth and has higher sales as a result. However, despite the promising trends, the stock has fallen 11% over the last five years, so there might be an opportunity here for astute investors. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

One more thing, we've spotted 4 warning signs facing Kino Polska TV Spolka Akcyjna that you might find interesting.

While Kino Polska TV Spolka Akcyjna may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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